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North American Morning Briefing : Stock Futures -2-

08/18/2021 | 05:55am EDT

In the process of building consensus around a central scenario over the next few months, "market participants will likely be focused on the potential inflation path, the impact of Covid variants and reopening models, the Fed response function and the contingency between hikes and taper, the evolution of labor markets and the rotation between manufacturing and services gauges."

Federated Hermes said investors could reduce interest rate exposure and capture further upside in corporate bonds via credit default swaps.

"In current market circumstances of broadly tight spreads investors have to be very conscious of the best way to access a company's capital structure," said Vincent Benguigui, senior credit portfolio manager, at the international business of Federated Hermes, adding that corporate bonds have outperformed credit default swaps, particularly in the U.S.

With "the cash price of global high yield near record highs we think CDS is the more optimal place to be positioned to capture further material upside, especially in the U.S." Also, those worried about rising inflation would lower their interest-rate exposure by switching corporate bonds for credit default swaps, Benguigui said.

Commodities:

Oil futures pushed higher in Europe, reversing some of their early week losses that came amid broader market selling, with the latest API data showing slightly smaller-than-expected falls in crude and gasoline inventories.

Elsewhere, Reuters reported that India is commercializing its strategic petroleum reserves and has begun selling off crude from its state refiners. That will allow it to lease out some of that space, though it might mean lower Indian imports from Indian refiners in the short-term, said DNB Markets' Helge Andre Martinsen.

Copper prices were up 0.7%, clawing back some of its early-week losses as the dollar retreated from its one-month highs. Gold was also a touch higher but this week has been "mostly unresponsive to rising inflation expectations and low yields," said Swissquote's Ipek Ozkardeskaya.

"Buying gold as a bad-day hedge is good, but costly in a market where equities post abnormally high returns and banks call for further gains," she said.

TODAY'S TOP HEADLINES

Alibaba's U.S. Shares Fall to Lowest Since 2019 as China Cracks Down

A new round of proposed regulations sent Alibaba Group Holding Ltd.'s U.S. listing to decline 4.9% on Tuesday to $173.73, its lowest close since October 2019.

The Chinese tech company's American depository receipts have fallen more than 25% so far this year.

Read More ->

Tencent's Second-Quarter Profit Rises 29%, Driven by Fintech, Advertising Businesses

Tencent Holdings Ltd.'s net profit rose 29% in the second quarter, as sharply higher revenue from business services and advertising operations offset a slowdown in its gaming business growth.

The Chinese videogame developer on Wednesday posted net profit of 42.59 billion yuan (US$6.57 billion) for the April-to-June quarter, while revenue grew 20% to CNY138.26 billion on the back of higher income from its advertising operations and digital-payment products.

Read More ->

Ex-Purdue Pharma Director David Sackler Defends Family's Bankruptcy Settlement

David Sackler, a former Purdue Pharma LP director from the OxyContin maker's controlling family, said Tuesday the Sacklers have a "moral responsibility" to help address the opioid epidemic, while defending a roughly $4.5 billion settlement that would shield family members from lawsuits accusing them of contributing to the crisis.

Mr. Sackler testified during the second week of a New York bankruptcy trial on the proposed deal, saying he's saddened that OxyContin has been misused and that his family's settlement offers the funding needed for opioid abatement. He said Purdue didn't intend for OxyContin to be misused and described the settlement as part of the Sackler family's obligation to address the country's opioid epidemic.

Read More ->

Sanchez Energy Bondholders Say Fidelity Tripled Its Money on Postbankruptcy Loan

Sanchez Energy Corp. has minted big gains for lender Fidelity Management & Research Co. after flirting with liquidation last year, according to company bondholders that now want the investment firm's dealings with Sanchez reined in.

A bondholder lawsuit filed Friday targets financing deals that Fidelity and Apollo Global Management Inc. reached with Sanchez after it exited chapter 11 last year, saying the lenders have seized too much control over the reorganized business and have enjoyed "massive" returns at the expense of unsecured creditors.

Read More ->

Fracking Contractor Basic Energy to Be Broken Up in Bankruptcy

Fracking contractor Basic Energy Services Inc. filed for bankruptcy Tuesday for the second time in five years, planning to sell itself in parts and setting up a $47.5 million conflict with its controlling shareholder, Ascribe Capital.

The Fort Worth-based company, which services oil and gas wells across nine states, said in court papers that three buyers have offered a combined $72 million for three business lines, a sum that would cover a fraction of Basic Energy's $387.5 million in secured debt.

Read More ->

Top TriMark Lenders Must Face Challenge to 'Cannibalistic' Rescue Loan

A New York judge declined to clear Oaktree Capital Management LP and Ares Management Corp. of allegations that a $427.5 million rescue package for restaurant supplier TriMark USA LLC trampled the rights of other lenders.

A group of TriMark lenders can continue pressing claims that last year's rescue deal ran afoul of the company's debt contracts by vaulting Oaktree, Ares and others to the top of the payment line, according to the ruling issued Monday by Justice Joel M. Cohen of the Supreme Court of the State of New York, a trial-level court.

Read More ->

Jerome Powell Says It's Unclear What Covid-19 Surge Means for Economy

Federal Reserve Chairman Jerome Powell said it remains to be seen how the U.S. economy will weather the recent Covid-19 surge, in comments that offered no views on the outlook for monetary policy.

"It's not yet clear whether the Delta [coronavirus] strain will have important effects on the economy; we'll have to see about that," Mr. Powell told students and teachers Tuesday during a virtual event held by the central bank.

Read More ->

Nancy Pelosi Braces for Showdown With Moderates Next Week Over Infrastructure Vote

WASHINGTON-Top House Democrats said the chamber would move forward with voting on the budget blueprint for a $3.5 trillion healthcare, education and climate package next week, rebuffing demands from a group of centrist Democrats to first vote on a $1 trillion infrastructure bill and urging their caucus to stay unified around President Biden's agenda.

"I would hope that none of us, that none of us, would do or say anything that would jeopardize passing these bills. These bills are critical for us maintaining our majority, and that must reign supreme," Democratic Whip James Clyburn (D., S.C.) told members on a Tuesday telephone call, according to a person listening to it.

Read More ->

Summer Road Trips, Falling Crude Prices Pump Up Refiners' Profits

Summer road trips and a pullback in crude prices have pumped up refineries' profits, offering brighter prospects for one part of the global oil complex despite rising worries about Covid-19.

Oil prices have grown choppy in recent weeks since China, the world's biggest commodities consumer, imposed restrictions to contain the Delta coronavirus variant. A decision by the Organization of the Petroleum Exporting Countries, Russia and the cartel's other partners to pump more oil is also weighing on crude markets.

Read More ->

RBNZ Keeps Cash Rate Unchanged After Latest Lockdown

The Reserve Bank of New Zealand left its policy rate unchanged at a record low, as an outbreak of the Covid-19 Delta variant upends daily life and threatens to set back the economic recovery.

The central bank on Wednesday said the economy no longer needs the current level of monetary stimulus, but it decided to keep the cash rate at 0.25% for now because of uncertainty stemming from the virus outbreak.

Read More ->

Cargo Ships Are Again Idling Off Jammed Southern California Ports

Container ships are stacking up again off Southern California's jammed ports, as a flood of imports and logjams in domestic logistics networks hit operations at the biggest U.S. gateway for seaborne trade.

Thirty-seven container ships were anchored off the adjacent ports of Los Angeles and Long Beach in recent days, according to the Marine Exchange of Southern California, the highest number since February, when 40 ships waited there.

Read More ->

Australia's Economy to Splutter to Life Rather Than Snap Back, CBA Says

SYDNEY-The widely expected snapback in Australia's economy later this year once Covid-19 vaccination rates hit key thresholds and lockdowns are eased is a fiction, according to the Commonwealth Bank of Australia.

Instead of roaring back to life upon reopening as the economy had following earlier lockdowns, growth will instead be patchy as the engines of industry splutter amid a new and uncertain backdrop of surging Covid cases, with much of the population still unvaccinated, said Gareth Aird, head of Australian economics at CBA.

Read More ->

Covid-19 Booster Shot to Be Offered to People Fully Vaccinated With Pfizer, Moderna

The Biden administration is expected to call for a third Covid-19 shot for Americans who were fully vaccinated with the two-shot regimen, citing the threat from the highly contagious Delta variant and heightened concerns over data showing initial immunity wanes over time.

Read More ->

Florida School Mask Mandates Draw Sanctions From State Board of Education

MIAMI-The Florida Board of Education voted unanimously to punish two school districts for implementing mask mandates that ran afoul of a state order barring such requirements.

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08-18-21 0554ET

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